Peninsula threatening to seize UK assets and force purchasers to complete in Spain

[jbotwood]

I am buying a property in the Medina Elvira golf complex in Granada Spain

My developer is threatening to take drastic action against all purchasers who cannot complete, and I felt this has to be posted on the public forms on this site to ensure it gets the maximum coverage possible. If this is becomming standard practice in Spain then many purchasers need to be aware of the seriousness of not completing on their property purchase

I would appreciate any comments regarding the legality of this threat - Can they really do this? There is nothing in the purchase contract to say they can, only that the deposit will be lost in the event of non-completion. Is there a consumer-protection body or organisation in Spain that could help a purchaser such as me faced with this situation?

This is a copy of an email I received from Gaspar Lino, the managing director of Peninsula Project Management today regarding my property completion in Medina Elvira 23 in Granada:



Dear Sir/ Madam,


Peninsula informs you that we have completed our development Medina Elvira 23 and have obtained the first occupation licence in August 2008.

We have contacted our clients on several occasions and have asked that these clients contact us regarding their mortgage application and completion date. The majority of our clients are now either in possession of their properties or in the process of completing. However, there are a small minority of clients who have remained naively silent. It is to this minority who wrongly believe they have no obligation to complete that we direct this correspondence.

Both yourself and your legal representative will receive (if you have not done so already) a letter informing you that interest charges are being applied to your existing debt and that community charges will be initiated on your accounts.

We have delayed the issuing of a final completion date in order for some buyers to get their finances in place, as this can take some time and as mentioned previously most of you are doing so by liaising with us. Once this date is officially announced to you, it CANNOT be changed, unless exceptional circumstances prevail (not answering any emails and total silence will rule out exceptional circumstances and indicate clear intention to default).

We are here and have been here to help people through the completion process. We have sent emails to clients made numerous phone calls, visits to the UK and Ireland to meet with clients and still have not received any news. Ignoring the problem will not make it go away!

The process from now on is as follows: You will receive a maximum date for the completion of your contractual obligations. If by that date you are not in a position to go to notary public you will be legally sued to complete. This will make the process cost you around €35.000 - €40.000 extra in court costs. Your lawyer will be charging you around €3.000 just to represent you (that is on top of the court costs). Spanish courts are favouring developers, especially ones with a clean history and who have fulfilled their obligations. They do not regard very highly investors, who were mere speculators and do not want to fulfil their contractual obligations. You will be legally forced to complete the purchase of your property.

We are willing to initiate this process and as Spain is an EU member, we will be able to seize your UK assets to receive our rightful amount.

We will delay the above to those who contact us via email before midday on Friday 10th April, 2009. The email must contain the stage of the completing process and expected completion date. If you have not been in contact with us already, do so with a contact telephone number and a brief, honest account of your situation. We can distinguish between CANNOT and WILL NOT very quickly and are willing, even at this stage to be helpful to EVERYBODY.

Thank you for your attention. We will be passing on the names of those who have replied to this letter to our legal department in order to delay the legal proceedings. Just to make the situation very clear, we need to hear from ALL of you, including the ones who have maintained telephone conversations exchanged emails or even visited us on site before.

For those clients whose mortgage application is being processed or those that have already completed, we thank you for your co-operation and ask you to ignore the above communication as it does not apply.

Please email all replies to me

Yours Sincerely,


J. Gaspar Lino
Managing Director
Telephone: +34 952 90 20 20
Fax: +34 952 90 17 80
Mobile:+34 696 94 94 40

 

[rowlandsbb]

Very interesting:- we have become so used to reading about Spanish builders not completing the developments and not getting LFO's and UK buyers having difficulty in getting their money back- not often we hear about the reverse!

In the Uk if you sign a contract and do not complete then it is possible that you may become liable for damages and it is reasonable to assume that the same applies in Spain

I would be surprised if any court could force you' to complete' if you can clearly not raise the finance...no use a court giving a ruling which can not be enforced for practical reasons but the buyer may have to pay damages, if any arise after the forefit of the deposit

Anyone should take immediate legal advice- you may have consumer rights allowing you to avoid completing for off plan purchases

In these circumstances anyone having problems should I suppose at least talk to the developer to see what is on offer in the way of help....it is a very difficult situation for many which is not helped by the exchange rate

But again on the forums you mainly read about the Spanish builders not completing or it is an illegal build !!!

 

[rowlandsbb]

Becoming a live forum issue but it seems the consumer laws may well provide some protection , if you are a consumer and not a dealer or invester

I think the relevant point is that a buyer may benefit from Consumer Law protection. i.e. becuase he is unable to complete because of the change in financial circumstances brought about by the credit crunch and cannot raise a mortgage loan any longer or not enough to cover completion.

But all legal action can be drawn out and is expensive so for many it may be better to start talking soone rather than later....at least to your lawyer in Spain

 

[robh]

I personally wouldn't even respond if you have no intention of completing, that sounds like the last desperate act of a desperate developer on his way down.

Spain's laws are fairly harsh if you don't complete, you usually end up losing all your payments that you have made if you can't complete (conversely in Brazil you only lose 20% of whatever you have paid if you pull out). Once you pull out, the developer can then sell your property again, keeping your initial payments as his compensation for you pulling out. This is probably the reason why he is trying to force completion as he knows he can't sell your property again right now even if he wants to.

Good luck with it all, personally I wouldn't be worried, but for peace of mind it is probably worth spending some money to talk to a lawyer.

Regards,
Rob.

 

[jbotwood]

Thanks very much for the replies on this, it's very much appreciated

Ok so from the advice it is clear that Peninsula can do this but may only be able to sue for damages. It also seems clear that if you are not a professional investor / speculator and you are genuinely not able to complete for financial reasons, then you are protected by general consumer law and any such legal action to force you to complete would be significantly weakened

Would this be generally true?

Would it also be true that if the developer sues, then they cannot attempt to re-sell the apartment during this process? They would then be liable for their loans on the apartment during this time

Would it also be true that even if they won a case, the purchaser could take it to appeal and potentially double the time it takes to finish the legal action, increasing the developer's legal fees and debt payments before the matter was resolved?

If a developer is suing their clients for forced completion then they must have decided they cannot re-sell the apartment, even after discounting it by the amount of the deposit they have retained and any further margin that remains in the resale value of the property - otherwise they would just resell the apartment and keep the deposit money

It also seems likely they are under pressure from the bank to pay off the debts on the unsold properties

Are any developers in this position starting to keep unsold units and rent them out? This seems to be a valid option and to my mind would be more financially rewarding to the developer than persuing a client who cannot afford to complete through the courts and possibly through an appeal for months and months during which they cannot rent or try to resell the property and have to maintain the loan payments on them. I believe a lot of UK developers are doing this to avoid bankruptcy

I just can't see the point right now of a developer declaring war and going to court, unless their client is filthy rich and just decided they didn't want the apartment anymore. It simply doesn't add up to me as a good business decision

Even if the developer was deperate and about to go bust, then tying up an unsold property and it associated loan for the duration of the court case would be financial suicide surely?

Any thoughts on this would be much appreciated